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January 26, 2005

SK-Earthlink Links South Korean Mobile Operator, Earthlink Networks

Mobile operator SK Telecom and Earthlink Networks launch 3G/Wi-Fi combo firm: Sky Dayton is the CEO of SK-Earthlink, a new MVNO (Mobile Virtual Network Operator) that will sign up end users with the promise of integrated Wi-Fi and third-generation cellular data networks for voice and data through a single handset. Dayton founded Earthlink and Boingo Wireless.

SK Telecom provides service to 18 million customers in South Korea, and their sister company in the SK Group, SK Teletech, makes advanced handsets for domestic use and internationally to China, Israel, Kazakhstan, and Taiwan. Dayton said in an interview today that SK Telecom offers a remarkable array of handsets including units with hard drives, five megapixel cameras, and satellite television broadcast receivers. "Not all those things are going to be applicable in a US market," Dayton said.

The service will attempt to leverage the growing availability of 3G networks with the increased ubiquity of Wi-Fi hotspots. Dayton says that although handsets and service plans won't be available until as late as the end of 2005, that generally SK-Earthlink would focus on allowing its customers to make voice calls from home Wi-Fi networks, Wi-Fi hotspots, and 3G cellular networks.

They would also leverage Wi-Fi alongside 3G in offering advanced data and entertainment services, although he did not mention specifics. "We think there's a big group of Internet savvy early adopter" consumers in the US who want this but can't get it, he said. SK-Earthlink may use Boingo's platform as the base on which they develop hotspot relationships--Dayton will have an arm's length involvement in that decision--but Boingo will certainly also continue to sell to other carriers regardless.

Other reports note that SK-Earthlink will use CDMA technology, SK Telecom's flavor, which ties them closely in the U.S. to Verizon Wireless and Sprint PCS, the only two remaining CDMA carriers here. Verizon has already deployed a significant portion of their ambitious EVDO network offering speeds of hundreds of kilobits per second, and Sprint PCS is committed to higher-speed offerings than its current 1xRTT rate that compares to modem speeds.

At the same time, Verizon Wireless said recently that 3G will trump Wi-Fi, a sentiment that baffles Dayton. "Wi-Fi is an unstoppable force," he said. "It's like trying to deny there's a big elephant in the room." Both technologies "are great individually, but if you put them together" they allow the best connection wherever a user is, he said. Dayton's comment seems particularly apt on a day when Strategy Analytics released a report showing that Wi-Fi will significantly reduce 3G profits.

Dayton's involvement in an MVNO is characteristic of his previous businesses. An MVNO has no infrastructure but purchases access from existing carriers for resale. "There's no political problem in a new MVNO: we don't have to build new networks," Dayton said. Earthlink was founded as an ISP with no modems. Boingo sells hotspot service without building hotspots. SK-Earthlink is unique for him in supporting end-user hardware: the handsets that will be sold to subscribers.

The 50-50 joint venture will incorporate Earthlink's existing Blackberry, cellular data, and Wi-Fi subscribers. Boingo provides Earthlink's Wi-Fi service through a reseller agreement. Reports indicate Earthlink has about 30,000 customers for these services.

Until today, Sky Dayton served as chairman of Earthlink Networks, a company he founded more than a decade ago as a dial-up Internet service provider with no modems. He will remain on the board, but steps down as chairman to avoid a conflict being the CEO of a joint venture between a firm he chairs and SK Telecom.

2 Comments

Brief note-- Alltel is CDMA-based, and is the 5th largest wireless company in terms of customers with somewhat over 10 million, as their recent acquisition of Western Wireless finishes. They plan EV-DO trials this year, and also have a couple of partnerships with local WiFi hotspot operators.

Alltel focuses on rural and other (often low-density) markets underserved by Verizon and Sprint, and then has roaming agreements with the big two. They have very strong presence throughout the South, Central Plains, and Mountain region.

Given that, I think that over 10 million wireless customers is a reason to consider them as another CDMA carrier in the US, and that Verizon and Sprint are not the only CDMA carriers.